The key ingredients of a fair capability (performance) management process
If an employee fails to achieve reasonable standards of performance the employer should undertake a review and warnings process.
Ultimately if satisfactory performance is not achieved, and after a reasonable opportunity for improvement has been given, it is possible for the employer to fairly dismiss the employee.
The process, in outline, is explained below.
The steps outlined below represent a ‘gold standard’ that provides the best possible defence to a claim of unfair dismissal. This does not mean that each and every element needs to be present in a particular case, however, the greater the departure from the standards below the more likely a finding of unfair dismissal will be.
Identifying Performance Issues
Usually the line manager will initially raise concerns. It is sensible to record what has been said in a written note or by email. A copy of this should be kept on the employee’s personnel file.
Informal discussions about performance can often be very helpful to:
(i) clarify the required standards,
(ii) identify areas of concern,
(iii) establish the likely causes of poor performance and identify any training / mentoring / support needs;
(iv) agree targets for improvement and set a time scale for review.
There are two areas where an informal approach will be less appropriate and it is often sensible to move directly to a formal capability procedure.
The first is where the failing in performance is so serious that the employer can have no confidence in the employee in the future (‘gross neglect of duty’ or ‘gross negligence’). A good example is where the employee’s underperformance has placed the safety of others at risk or where it has caused significant damage to the employer’s business.
The second is where the employee is still within their probationary period and / or has yet to complete sufficient qualifying service to be able to claim unfair dismissal.
The ACAS guidance on how to manage performance is very useful and the key principles should be understood and applied.
Care must be taken to ensure that performance issues are dealt with sympathetically and with respect for the privacy of the individuals involved. All individuals concerned must treat information disclosed within any capability management process as confidential.
Performance or Capability Policy or Procedure & the ACAS Code
Often the employer will have its own established policy or procedure for dealing with capability matters. If this is the case then reference to this document and compliance with its provisions is essential. This is because sometimes the procedural safeguards set out in this document will be different (i.e. more generous) than the requirements of fairness under the ACAS Code and the employment law principles that apply.
In any event the basic procedural safeguards set out in the ACAS Code of Practice on disciplinary and grievance procedures must be complied with (and will trump any less favourable provisions in the employer’s policy or procedure). Failure to comply with the code is likely to make a dismissal unfair and result in an increase to any compensation ordered (of up to 25%).
Where an informal approach has failed to produce an improvement in performance, or if the failing is very serious, a formal approach will become necessary.
The employee should be invited to a capability hearing and the performance concerns must be set out in writing, together with notice that if the concerns are found to be valid, either a warning or (in the most serious cases) dismissal may be the outcome of the hearing.
It is sensible to stress that no decision on the outcome of the process will be made until the employee has been afforded the opportunity to present their case and provide any explanation or excuse that may affect the outcome of the process.
Copies of any relevant documents and statements gathered in the investigation process should be provided and the employee given a reasonable amount of time to prepare their defence.
What is reasonable will depend upon the circumstances, however, 7 days is a sensible starting position. If the employee requests more time to prepare, their request should be acceded to unless there are very good reasons for refusing.
Right to be accompanied
The employee has the right to be accompanied to the capability hearing by either a trade union representative or a work colleague and should be notified of this right.
A work colleague must be given reasonable time off without loss of pay to accompany the employee.
The employer may refuse the employee’s choice of companion if reasonable (e.g. if there is reason to consider that their attendance would prejudice the hearing, or they have a conflict of interest, or are unavailable and unable to attend within 5 days of the hearing date).
The companion may make representations, ask questions and sum up the employee’s case, however, they cannot answer questions on the employee’s behalf.
An appropriate capability hearing officer should be selected. This may be the line manager, however if the line manager’s opinion of performance is key in the case against the employee (i.e. where performance cannot be measured against objectively justifiable measures, such as sales revenue) or the employee has alleged bias or unfairness on the line manager’s behalf, then a more senior manager should decide the hearing.
Bear in mind that an appeal may follow an adverse outcome to the hearing and that where practicable a more senior level of management should be kept separate from the process and made available to consider any appeal.
The hearing should be re-arranged if the employee or their companion cannot attend. However, if the employee is persistently unable or unwilling to attend it is possible to hold the hearing in their absence.
The management and the employee may decide to bring witnesses to the hearing, particularly where the facts relied upon are not wholly established in document form or where the employee disputes the accuracy of the facts relied on in the management case for a formal sanction to be applied. The employee should be given the opportunity to ask questions of an witness.
At the hearing the capability hearing officer should ensure the following points are covered:
- The standards required of the employee are re-iterated clearly. It is sensible to ask if the employee agrees that the standards are reasonable and if they do not agree, why this is.
- Evidence that has been gathered in support of the case against the employee is set out and reviewed. The employee should be given the chance to challenge this evidence.
- The reasons for considering that the employee’s performance has been unsatisfactory should be confirmed. This will sometimes be obvious and well established on the evidence, however, it is always worth ensuring that the employee properly understands exactly what it is alleged they have done, or failed to do.
- The likely cause/s of any failing in performance should be established including why any measures taken to assist the employee have failed.
- If any further measures to assist can be implemented, this should be agreed. It is sensible to ask the employee whether they feel they have been adequately supported, and if they do not, why they say this is so. The capability hearing officer can then decide whether this is sufficient to explain the underperformance.
- Where underperformance is established, reasonable targets for improvement and a reasonable further review period should be agreed. It is sensible to ask the employee if they agree that the targets and review period are reasonable and if applicable why they disagree.
If the employee alludes to new evidence or it otherwise becomes necessary to gather more evidence, the hearing should be adjourned and re-convened. The employee must be given a reasonable opportunity to consider any new evidence before the hearing re-commences.
Approach to Issues and Facts
It is sensible to follow this logic when dealing with allegations:
Firstly: is the allegation sufficiently clear about what happened or did not happen (i.e. can the employee know with absolute certainty what they did, or failed to do, when this happened, etc)?
Secondly, if this is clear, does the employee admit the facts alleged, or deny them?
Thirdly, if there is a dispute on facts, weigh up the reasons for and against each side (management case and employee’s response) and make formal findings of fact.
Fourthly, then decide what the facts mean, (i.e. are they actually indicative of misconduct or poor performance).
Fifthly, if they are, enquire about mitigating factors and consider whether these are sufficient to mitigate the conduct or performance such that a warning or dismissal is not necessary.
Finally, if a warning or dismissal still needs to be considered, consider whether the mitigating circumstances are sufficient to make the sanction a lower one than would otherwise be the case.
The warning letter will usually: re-iterate the allegation/s, say whether each was conceded or contended, make findings of fact if necessary, make secondary findings about what the facts mean and then consider sanction together with mitigation.
If the capability hearing officer finds that the employee’s performance has been unsatisfactory and that there has been no adequate excuse for this, then it will be necessary to issue a formal warning. The warning should be in writing and set out:
- The areas in which performance has been inadequate.
- Targets for improvement (ideally which are capable of being objectively measured).
- Any measures to be put in place to support the employee (such as training and supervison).
- The period for review.
- The potential consequences if performance does not improve (e.g a further warning or dismissal).
- The employee’s right to appeal if they are dissatisfied with the warning.
- The time period over which the warning will operate and remain ‘live’ on the employee’s personnel file. Something between 6 months and a year will be reasonable. After this point the warning remains on the personnel file, but will be disregarded in any future capability process.
At this stage it is necessary to decide whether the warning will be a ‘final warning’ (following which dismissal will follow), or a ‘first warning’ (with a final warning to follow). This will depend upon the seriousness of the underperformance and the reasonableness of allowing more time for improvement.
If the informal procedure has been followed it may be fair to move to a final warning (the employee will then have been given 2 opportunities to improve). However, check relevant policy documents to make sure they allow this.
If performance does not improve, then a further hearing will become necessary and the process outlined above repeated.
As the formal process moves closer to a dismissal the need to adhere to all procedural safeguards becomes paramount. It is sensible to take legal advice periodically throughout this process.
The employee’s performance should be monitored throughout the review period and then assessed at the end of the period. The line manager will normally do this.
It is important wherever possible to assess performance against objectively measurable criteria (the targets for improvement); this makes it easier to prove a lack of adequate performance.
If the line manager feels there has been a substantial but inadequate improvement they may extend the review period. However, if there has been no improvement or inadequate improvement a further capability meeting will be necessary.
If the line manager is satisfied that performance has improved satisfactorily, then this should be confirmed in writing to the employee and no further procedure is necessary provided the performance is sustained during the remainder of the warning period.
Dismissal or redeployment
Where a failure to perform adequately is particularly serious or a final warning has been issued and yet underperformance persists, it will be necessary to consider dismissal.
The procedural safeguards outline above will apply as before, but the standards of proof and requirements of fairness are more pronounced. Professional advice at this stage is highly recommended.
For a decision to dismiss to be fair the capability hearing officer must:
- Have allowed the employee an opportunity to argue their case against dismissal.
- Ensured that the investigation undertaken is reasonable (i.e. does not omit anything that a reasonable employer would consider).
- Have formed a reasonable and honest belief that the employee’s performance has been unsatisfactory and that an improvement in performance in the near future is unlikely.
- Given due consideration and weight to any mitigating factors presented by the employee.
- Concluded that it is not reasonable to redeploy the employee elsewhere within the business (particularly if a suitable alternative vacancy is available).
A decision to dismiss must be set out in writing together with a summary of the reasons for the decision.
The date on which the employee’s employment is to terminate should be stipulated. In cases other than gross neglect this will be on contractual notice (or with a payment in lieu thereof).
The employee must be given the opportunity to appeal against dismissal.
There is no reason to delay a decision to dismiss pending the outcome of an appeal, however, it is sensible to advise the employee that if their appeal is successful they will be re-instated and receive back pay up to the date of re-instatement.
A more senior manager than the person who decided to dismiss should, wherever possible, deal with the appeal hearing. This ensures, insofar as possible, that the decision is objective and free from bias or pre-judgment.
Depending upon the circumstances the appeal hearing may take one of two forms:
- A complete re-hearing of the reasons for dismissal with all evidence re-heard.
- A review of the fairness of the decision to dismiss in view of the facts that are established and the procedure that was followed.
Whichever approach is taken, it will be necessary to consider and make findings in relation to each and every ground of appeal asserted by the employee. It is sensible to begin the appeal hearing by agreeing a list of grounds of appeal and then focusing on each of these during the hearing.
If the appeal is unsuccessful the reasons for rejecting it should be confirmed in writing and the employee notified that the decision is final.
If the appeal is successful then the employee should be re-instated, however, where a final warning has been issued this will remain live and may be extended (and further capability process may ensue if the employee’s performance does not improve).
Illness and disability
If the employee suffers from an illness and this is wholly or partly the reason for inadequate performance special considerations apply.
Firstly, the illness may qualify the employee as disabled within the meaning of the Equality Act 2010 and a duty to make reasonable adjustments engages.
This may mean that the standard of performance required of the employee has to be reduced, or that special arrangements for managing performance are instituted. If there is any reason to suppose an employee may suffer from an adverse health condition then expert medical and legal advice should be sought prior to any warning or dismissal.
Secondly, in cases involving illness that is short term (and therefore unlikely to qualify as a disability) it is likely to be more difficult to form a reasonable belief that performance will not improve in the near future.
Further, if the illness was caused or contributed to by the employee’s work, a higher standard of fairness will operate than would otherwise be the case.
If the employee has been on maternity leave or was pregnant during the period of poor performance great care must be taken to ensure that the performance issues identified are not because of maternity leave or pregnancy.